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It’s like the energizer bunny, they keep going, and going, and going… Stocks advanced again yesterday as more solid earnings hit the tape. Reports out of Brussels suggested that the EU and the UK had reached a preliminary BREXIT deal that will lay the groundwork for a divorce, a divorce that has been three years in the making, and now needs the British Parliament to ratify. By the end of the day, the Dow added 23 points, the S&P was ahead by 8 points, leaving it just under the century mark — 3000— a level that appears to be just a bit of a pain in the… for it.  The Nasdaq advanced by 32 points and the Russell soared higher adding 17 points or 1.1%, by far the clear winner…

All this while the economic data was a bit weak! Industrial Production fell by 0.4%, Housing Starts missed estimates by 9%, building permits missed by 3%, and Manufacturing fell by 5%.  This only confirming that if the FED does anything, it will be another CUT in rates on October 30th, adding more Kool Aid to the mix as they continue to serve up more stimulus.  

Movers and shakers

NetFlix (NFLX) spiked 6% after those strong results on Wednesday evening. URI (United Rentals) also rose 5% after third quarter results BLASTED through the estimates. DOV (Dover) broke out and advanced more than 5%. JPM and JNJ, both names that had reported earlier in the week, also continued to move higher, adding another 1% onto their most recent move.

Drug stocks (or should I say Medicinal Marijuana stocks) were not to be left behind either.  CRON (Cronos), which had rocketed higher by 40% in Wednesday’s post trading session, continued to advance yesterday, rising another 16% at the open. The stock ended the day off that high but still up another 5%. This dragged ACB (Aurora Cannabis) and TLRY (Tilray) along for the ride – rising 7% and 3% respectively!

AA (Alcoa) and CSX (CSX Corp) continued to advance yesterday following the spikes in the afterhours session on Wednesday, adding another 5% and 1% respectively.

So I ask — What happened to the weaker earnings that the Street had prepared us for? By the looks of it, that isn’t the way this story is playing out. But, there are still two more weeks to get through. I suppose the next two weeks could prove to be a disaster (something I doubt). Look, of the 64 S&P companies that have reported as of yesterday, 52 of them or 81% have beaten the estimates. Yes, the bar is lower as companies try to manage expectations. But then you have to ask: do they “manage expectations”  or set the stage in a way that locks in a beat? Just sayin’… Remember that analysts had cut profit estimates for all 11 sectors that account for the slowing global economy, with the US/China trade war setting the tone.  

Today’s lineup includes: KSU, SYF, STT, KO, SLB, and AXP

Overnight, we got word that China’s 3rd quarter GDP rose by 6%, missing the 6.1% estimates. (The worst performance in 27 years, if you even believe the data at all! Wait! Am I allowed to question anything that China does at all, or am I supposed to just sit down and shut up?) Analysts were quick to point out that this is trade related.

Mizuho Bank’s Head of Economic Strategy had this to say about the most recent report: “Unchecked, the US/China trade conflict is set to sink growth well below 6%. Especially given that structurally, growth is set to moderate to 5% in the next 5-10 years.”  

So is that really an issue? I mean he just said that it is already EXPECTED to moderate to 5% in the next 5-10 years. The US is only helping to get it there a bit faster! Japan +0.18%, Hong Kong -0.72%, China -1.3% and ASX -0.52%.

This morning in Europe, market centers there are mixed, with not one of the countries showing any signs of real distress.  The focus is on BREXIT. Tomorrow will prove to be a pivotal day for the Brits. While the EU and UK PM BoJo have agreed to a deal, he now needs to bring it home to Parliament to secure the necessary approval if he is to succeed in getting divorced. Now look, Northern Ireland’s Democratic Party has already said that they would vote “NO.” So that isn’t helpful. Next, he needs the support of the 21 moderates in his own party that he threw out last month. So how might that work out? (Isn’t one of them his own brother?) The British Parliament’s Treasury Committee has asked Finance Minister Sajid Javid to publish the updated economic forecasts of the cost of leaving the EU under this new deal, before the vote takes place. All of which is sure to create more drama… FTSE -0.13%, CAC 40 – 0.17%, DAX +0.26% EUROSTOXX +0.14%, SPAIN +0.11% and ITALY -0.09%.

US futures are off a bit today as it continues to digest all of the news. It rallies one day only to give it back the next, while all the time keeping us just within a hair of the years highs. Dow futures suggest a lower open of 9 points, the S&P is off by less than 1 point, the Nasdaq is giving up 9 points and the Russell is off by 1 point. Weaker China data is being credited for the mixed mood around the world. I say BS. There are no economic reports out today and so the market will focus on more earnings supported by any BREXIT news to hit the tape. Unrest in Turkey and Syria will simmer on the back burner, along with Hong Kong.

The S&P remains in the 2950-3025 range, with real resistance at 3000. My gut still tells me that we will test a bit lower before this is all over, but not anything to write home about. There is underlying trend line support right at the 2945 level. With the FED due to cut rates at month’s end, it’s hard to see how the market will have any meaningful correction, unless earnings start to disappoint with every new report, again something I don’t think is going to happen.

Have a great weekend.

Take good care.

Kp

Veal Shank “Osso Bucco”  

This is a great fall/winter dish.  Thick, meaty, delicious. If done right, it falls right off the bone and melts in your mouth… Osso bucco: is a specialty in Milan. It is made with carrots, celery, onions, garlic, S&P, lemon zest, red wine, beef broth and tomato paste… You prepare it in the morning and then let it slow roast in the oven for hours… try it. It is wonderful.

First rinse the shanks and pat dry… dredge in seasoned flour – (here you can use GF – gluten free – flour) and then brown in a frying pan with heated olive oil… making sure that you keep the heat on high to sear the outside while trapping all of the juices inside… After you have browned the meat – place in a roasting pan – making sure not to crowd them too much… At this point — chop (not dice) chop, the carrots, celery and onions… crush 4 / 5 garlic cloves and spread the garlic and veggies over the meat. Add lemon zest on top – not to much — but enough so that you know it’s there.

Back to the frying pan – deglaze with red wine, add beef broth and a can of tomato paste (not puree) paste. Stir – bringing to a boil – then reduce heat and let thicken a bit – all of 4 mins or so… If need be — add a bit more beef broth – then add this mixture to the roasting pan – making sure that you bathe the shanks in wine/beef broth. Cover tightly and place in a 325-degree oven for at least 4 hrs… when ready… take a look, smell the wonderful aroma, notice how it fills the kitchen and permeates the house.

When done – remove ½ of the veggies and puree. Place some of the pureed veggies in the center on a warmed plate and then place a veal shank on top of that. Next — take some of the remaining veggies and circle the shank. You should serve this with a nice onion risotto or even creamy mashed potatoes…

Have your guests take a seat, light the candles, turn on some nice dinner music to fill the room. Try this with a Brunello di Montalcino — it’s like velvet and always works nicely

Buon Appetito.